Miloch
March 7th 19, 10:16 PM
https://www.bloomberg.com/news/articles/2019-03-07/scammed-at-40-000-feet-opaque-market-costs-the-jet-setting-rich
Five grand for mystery sushi. Seven for plastic cups. And more fuel than the
plane could possibly hold.
Such are the deceptions stinging the billionaires and mere millionaires of
today’s private jet-set class. In an era of ultra-wealth, reports of shady
billing related to private-jet travel are on the rise.
It says as much about this era of hyper-wealth as about modern-day fraudsters.
So much money is sloshing around the world that, inevitably, crafty operators
are seeking a slice, trying to help themselves to what they figure is a mere
rounding error to a billionaire. About a third of private-jet owners are worth
more than $500 million, according to a 2018 report by VistaJet and Wealth-X.
Some fraud attempts are almost comical. One jet owner found himself charged
4,000 pounds ($5,300) for 240 sushi boxes apparently served on board his jet
while it was empty, according to My Sky, a company whose software helps
scrutinize and manage private-jet costs. Another was charged 6,000 euros
($6,800) for plastic cups after the provider mistakenly added two zeros to the
invoice. Still another customer’s refueling bill ended up exceeding the capacity
of the plane’s fuel tanks by more than two tons.
Keeping Track
Part of the problem is the sheer quantity of paperwork and bills associated with
private air travel. One flight can generate dozens of invoices, for fuel, food,
over-flight permissions, airport fees, on-ground services, crew hotels,
re-positioning flights and maintenance. And every trip is different. That makes
it hard for globetrotting billionaires to keep track.
With complex assets like jets and yachts, “there is a tendency for people not to
understand the cost structure, so if someone puts an invoice in front of them,
they’ll sign it,” said Mike Brodsky, a managing director at Deloitte Financial
Advisory Services.
It’s not clear whether such attempts to overcharge are becoming more prevalent
or simply more visible in today’s world of social media and technology. While
there’s no precise accounting of the amounts lost through inefficiency and fraud
by ultra-wealthy households, they likely run into the billions of dollars a
year.
“Any numbers out there about the amount of fraud against ultra-high-net worth
people is understated, because many people won’t admit to it,” Brodsky said.
There are 21,000 business jets worldwide, which cost their owners about $32
billion to run. This sum can be decreased by a quarter if operations are
optimized, My Sky estimates.
One jet broker, who asked not to be identified when talking about potential
customers, said he’s seen evidence of overcharging and that it’s common for jet
owners to fall out with their management companies.
Some aircraft operators now say that providing transparency has become an
essential selling point.
“All our negotiations are focused on getting the best fares for our aircraft
owners,” said Bjorn Naberhuis, vice president for business development at Global
Jet Concept, adding that their clients can find invoices on its online portal
and review cost breakdowns. “The owners and their family offices are getting
more and more educated and understand more and more about this market.”
But frustration remains high with the industry. A chief operating officer for a
large family office, who didn’t want to be identified discussing private
business arrangements, describes jet management companies as “a necessary evil”
and recently switched to a new one. The old company gave him information that
was disorganized and hard to review, and didn’t try to get him the best pricing,
he said.
“It’s an absolutely nontransparent market,” said Kirill Kim, co-founder of My
Sky. “You can’t control any of your costs.”
*
Five grand for mystery sushi. Seven for plastic cups. And more fuel than the
plane could possibly hold.
Such are the deceptions stinging the billionaires and mere millionaires of
today’s private jet-set class. In an era of ultra-wealth, reports of shady
billing related to private-jet travel are on the rise.
It says as much about this era of hyper-wealth as about modern-day fraudsters.
So much money is sloshing around the world that, inevitably, crafty operators
are seeking a slice, trying to help themselves to what they figure is a mere
rounding error to a billionaire. About a third of private-jet owners are worth
more than $500 million, according to a 2018 report by VistaJet and Wealth-X.
Some fraud attempts are almost comical. One jet owner found himself charged
4,000 pounds ($5,300) for 240 sushi boxes apparently served on board his jet
while it was empty, according to My Sky, a company whose software helps
scrutinize and manage private-jet costs. Another was charged 6,000 euros
($6,800) for plastic cups after the provider mistakenly added two zeros to the
invoice. Still another customer’s refueling bill ended up exceeding the capacity
of the plane’s fuel tanks by more than two tons.
Keeping Track
Part of the problem is the sheer quantity of paperwork and bills associated with
private air travel. One flight can generate dozens of invoices, for fuel, food,
over-flight permissions, airport fees, on-ground services, crew hotels,
re-positioning flights and maintenance. And every trip is different. That makes
it hard for globetrotting billionaires to keep track.
With complex assets like jets and yachts, “there is a tendency for people not to
understand the cost structure, so if someone puts an invoice in front of them,
they’ll sign it,” said Mike Brodsky, a managing director at Deloitte Financial
Advisory Services.
It’s not clear whether such attempts to overcharge are becoming more prevalent
or simply more visible in today’s world of social media and technology. While
there’s no precise accounting of the amounts lost through inefficiency and fraud
by ultra-wealthy households, they likely run into the billions of dollars a
year.
“Any numbers out there about the amount of fraud against ultra-high-net worth
people is understated, because many people won’t admit to it,” Brodsky said.
There are 21,000 business jets worldwide, which cost their owners about $32
billion to run. This sum can be decreased by a quarter if operations are
optimized, My Sky estimates.
One jet broker, who asked not to be identified when talking about potential
customers, said he’s seen evidence of overcharging and that it’s common for jet
owners to fall out with their management companies.
Some aircraft operators now say that providing transparency has become an
essential selling point.
“All our negotiations are focused on getting the best fares for our aircraft
owners,” said Bjorn Naberhuis, vice president for business development at Global
Jet Concept, adding that their clients can find invoices on its online portal
and review cost breakdowns. “The owners and their family offices are getting
more and more educated and understand more and more about this market.”
But frustration remains high with the industry. A chief operating officer for a
large family office, who didn’t want to be identified discussing private
business arrangements, describes jet management companies as “a necessary evil”
and recently switched to a new one. The old company gave him information that
was disorganized and hard to review, and didn’t try to get him the best pricing,
he said.
“It’s an absolutely nontransparent market,” said Kirill Kim, co-founder of My
Sky. “You can’t control any of your costs.”
*